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Determining redundancies with psychometric testing

18 October 2017


Inland Revenue is carrying out a massive multi-year "Business Transformation" project which will affect about 3500 employees and result in about 1500 being made redundant.

Christchurch City Council is also carrying out a large restructure due to the re-opening of facilities that have been closed since the Christchurch earthquake.

What these restructures have in common is that the employer plans to use psychometric testing to work out who should be kept on. In the case of Inland Revenue, hundreds of existing employees were asked to undergo psychometric and personality testing, with their jobs on the line.

Psychometric testing is not new to employment. It has been used for a long time in recruitment. The Ministry of Business, Innovation and Employment and the Department of Conservation have both previously used psychometric testing to determine redundancies. In 2013, it was reported that government departments had spent $1.5million in 12 months on psychometric testing.

Restructures often replace existing jobs with different, newly designed roles. Sometimes roles remain unchanged but the number of jobs available is reduced.

Behind all of the statistics in restructures are often loyal and long-serving employees. In the case of Inland Revenue, it is reported that many employees have held their positions for over 20 years. Many employees will remain in their jobs, but in many cases the number of jobs available for a particular role will be reduced.

When existing employees apply for a reduced number of jobs in the course of a restructure, how do you select the people that remain? Sometimes individual employment agreements, but more often collective agreements, will set out the process and criteria for deciding who stays.

Often, however, employers have wide discretion to develop additional criteria on which they assess employees. The criteria must be chosen in good faith, be fair, and be communicated to the employees.

With regard to psychometric testing, having an objective, scientific test to establish which individual is best for a role could theoretically only increase fairness to employees and reduce bias. On the face of it that is a very powerful argument.

However, a key weakness with psychometric testing is that it is considered pseudo-scientific and its reliability is often criticised. Psychometric testing may eliminate some human bias; however the tests are often designed for other purposes such as recruitment and can test irrelevant traits. Human error is still possible as the tests can be administered, interpreted, or applied incorrectly.

Psychometric testing should not be used as the only criteria for deciding redeployment. Crucial factors such as skill, experience, performance and overall suitability for the role must also be considered.

In a case involving a Mr Gilbert and Transfield Services Ltd, the Employment Court decided that the value of psychometric testing was "dubious". Chief Judge Colgan stated that a testing tool designed for recruitment was inappropriate for determining which employee should be made redundant. This was particularly so as the employer was not even able to access the questions asked or the answers given. The employer also refused to provide the employee with his test scores.

Chief Judge Colgan stated that employers using testing procedures they do not fully understand, and are not permitted to know about, will have difficulties when an employee challenges the process. The Chief Judge considered the relevant assessment criteria to be the employee's skills and experience, while the psychometric and personality testing designed for potential new employees was irrelevant.

Gilbert's case was actually decided on the employer's failure to follow its collective agreement which required the employee's position to be superfluous. Gilbert's position was not actually superfluous, although some others were.

If psychometric testing was a perfectly accurate and reliable method to determine the best person for a job, it would be hard to question redeployment decisions based on testing. However, people are required to answer questions, many of which seem peculiar, and they feel that there is a lack of transparency or control over the outcome.

Some of the testing previously used by government departments asked participants whether they would enjoy skydiving and if they frequently have indigestion. Other questions covered whether the individual had ever deliberately lied and whether they found Greek mythology interesting.

It is understandable that an employee threatened with redundancy and applying for a role with an employer they have already worked for would find such questions deeply troubling. The creators of the test may well have reasons for the seemingly bizarre questions, but to the participant it may be hard to understand why such interrogations are relevant, or indeed necessary.

So who would you rather have determining whether you stay or are let go? An imperfect panel of managers, each with human error and personal biases, who may or may not like you? Or would psychometric testing, the accuracy of which could not be guaranteed, be more fair? It appears that both IRD and the Christchurch City Council are using psychometric testing alongside traditional criteria.

The Public Service Association ("PSA") is bringing a case against the Commissioner of Inland Revenue regarding the use of psychometric tests. They say there is a lack of contractual obligation to require such testing and although the tests are now 'optional' there is pressure to take them as not completing the test may be as harmful as getting a poor result.

The PSA also claims there is a lack of reliable information being provided and psychometric testing is not consistent with the principles of the Treaty of Waitangi.

We will watch IRD's case as it develops. Will other employers start to use psychometric testing, if doing so is found to be defensible? How would you feel about psychometric testing becoming standard when jobs are on the line?


Cullen - The Employment Law Firm is one of only eleven law firms in New Zealand approved to provide employment law services to Government and the public sector.

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